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Apple’s Real Problem with Samsung

Frank Fox - 2012.10.31

Apple is a secretive company that keeps information out of the hands of the media, but more importantly away from the competition. Now if two close partners, like Samsung and Google, switch to become competitors, your control of information happens in a leaky bucket.

How can Apple design and build the next iPhone using Samsung chips without Samsung knowing the technology inside the processor, the exact price, and the approximate release date of the device? Samsung is not supposed to use that information for its own benefit, especially if there is an NDA (non-disclosure agreements), but Apple cannot control the situation.

If Apple threatens to take its business from Samsung, Samsung can shrug and keep building chips for Android phones instead.

The same is true of Google on the software side. Since Google’s Map app used to be integrated with iOS, they had to have the best interoperability and received preferred treatment over other companies for knowing more about the plans and directions that Apple was going to take with iOS. Google could and did provide support and features for their Android version over the iOS version. Google dragging its feet could hurt Apple – and especially Apple’s reputation as an innovator – if the iOS map app lagged behind Android.

These two companies lost incentive to provide their best support and features to Apple. They went from friendly suppliers of hardware and software to less cooperative suppliers and a became major risk to Apple’s competitive advantages.

Compare this to Microsoft. The Microsoft Office suite is still very important on the Mac, but it doesn’t require more insider information than any other software developer. A new version doesn’t have to be released on the same day that Apple releases either new hardware or a new version of Mac OS X.

If Microsoft drops support, Apple can either improve its iWork suite to be more competitive or fund OpenOffice development.

For Microsoft, development for the Mac is profitable. Microsoft risks creating more competition if it fails to supply a good enough solution. It may not be a perfect friendship, but in the business world it is strong, because it is built on mutual benefit.

It may seem harsh that Google and Samsung have been kicked out of Apple’s inner circle, but Apple does not have a choice. Samsung and Google’s friendship was too costly to Apple’s future success.

Google can still write and sell apps for the iPhone. But Google is not trustworthy enough to be given integrated status with iOS. Samsung can continue to sell chips used in the iPhone and iPad, but it cannot be depended on to deliver bleeding edge technology that sets Apple apart from the competition.

The surprise isn’t that Apple has had to sever relationships with these companies. The surprise is how long it has taken for the breakup to happen. That shows how much Apple let them into its products, and how difficult it was to break off their agreements. If Steve Jobs really was as angry as has been reported, these agreements should have ended within the first year that Android was released.